Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
ý
No
¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
ý
No
¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
ý

Accelerated filer
o

Non-accelerated filer
o

Smaller reporting company
o

Emerging growth company
o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at December 1, 2018

Common Stock, $0.01 par value per share

307,467,240 shares

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MACY’S, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(millions, except per share figures)

13 Weeks Ended

39 Weeks Ended

November 3, 2018

October 28, 2017

November 3, 2018

October 28, 2017

Net sales

$

5,404

$

5,281

$

16,516

$

16,267

Credit card revenues, net

185

145

528

473

Cost of sales

(3,226

)

(3,152

)

(9,927

)

(9,858

)

Selling, general and administrative expenses

(2,255

)

(2,188

)

(6,501

)

(6,406

)

Gains on sale of real estate

42

65

111

176

Impairment, restructuring and other costs

(3

)

(33

)

(39

)

(33

)

Operating income

147

118

688

619

Benefit plan income, net

9

15

31

42

Settlement charges

(23

)

(22

)

(73

)

(73

)

Interest expense

(64

)

(76

)

(204

)

(244

)

Losses on early retirement of debt

—

—

(5

)

(1

)

Interest income

5

2

17

7

Income before income taxes

74

37

454

350

Federal, state and local income tax expense

(12

)

(10

)

(96

)

(138

)

Net income

62

27

358

212

Net loss attributable to noncontrolling interest

—

3

10

7

Net income attributable to Macy's, Inc. shareholders

$

62

$

30

$

368

$

219

Basic earnings per share attributable to Macy's, Inc. shareholders

$

0.20

$

0.10

$

1.20

$

0.72

Diluted earnings per share attributable to Macy's, Inc. shareholders

$

0.20

$

0.10

$

1.18

$

0.71

The accompanying notes are an integral part of these Consolidated Financial Statements.

Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax

7

8

25

26

Settlement charges, before tax

23

22

73

73

Tax effect related to items of other comprehensive income (loss)

35

(15

)

24

(60

)

Total other comprehensive income (loss), net of tax effect

(99

)

25

(72

)

96

Comprehensive income (loss)

(37

)

52

286

308

Comprehensive loss attributable to noncontrolling interest

—

3

10

7

Comprehensive income (loss) attributable to
Macy's, Inc. shareholders

$

(37

)

$

55

$

296

$

315

The accompanying notes are an integral part of these Consolidated Financial Statements.

3

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(millions)

November 3, 2018

February 3, 2018

October 28, 2017

ASSETS

Current Assets:

Cash and cash equivalents

$

736

$

1,455

$

534

Receivables

180

363

219

Merchandise inventories

7,147

5,178

7,065

Income tax receivable

10

—

—

Prepaid expenses and other current assets

594

650

610

Total Current Assets

8,667

7,646

8,428

Property and Equipment - net of accumulated depreciation and
amortization of $5,084, $4,610 and $5,330

6,572

6,672

6,742

Goodwill

3,908

3,897

3,897

Other Intangible Assets – net

481

488

491

Other Assets

733

880

835

Total Assets

$

20,361

$

19,583

$

20,393

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Short-term debt

$

65

$

22

$

22

Merchandise accounts payable

3,381

1,590

3,173

Accounts payable and accrued liabilities

2,998

3,271

3,257

Income taxes

—

296

34

Total Current Liabilities

6,444

5,179

6,486

Long-Term Debt

5,469

5,861

6,297

Deferred Income Taxes

1,185

1,148

1,586

Other Liabilities

1,618

1,662

1,750

Shareholders' Equity:

Macy's, Inc.

5,667

5,745

4,282

Noncontrolling interest

(22

)

(12

)

(8

)

Total Shareholders’ Equity

5,645

5,733

4,274

Total Liabilities and Shareholders’ Equity

$

20,361

$

19,583

$

20,393

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(millions)

39 Weeks Ended

November 3, 2018

October 28, 2017

Cash flows from operating activities:

Net income

$

358

$

212

Adjustments to reconcile net income to net cash provided by operating activities:

Impairment, restructuring and other costs

39

33

Settlement charges

73

73

Depreciation and amortization

718

741

Stock-based compensation expense

48

46

Gains on sale of real estate

(111

)

(176

)

Amortization of financing costs and premium on acquired debt

(5

)

(10

)

Changes in assets and liabilities:

Decrease in receivables

163

274

Increase in merchandise inventories

(1,969

)

(1,665

)

Decrease in prepaid expenses and other current assets

16

34

Increase in merchandise accounts payable

1,664

1,630

Decrease in accounts payable, accrued liabilities
and other items not separately identified

(196

)

(412

)

Decrease in current income taxes

(301

)

(321

)

Increase in deferred income taxes

62

47

Change in other assets and liabilities not separately identified

(130

)

(107

)

Net cash provided by operating activities

429

399

Cash flows from investing activities:

Purchase of property and equipment

(468

)

(359

)

Additions to capitalized software

(209

)

(191

)

Disposition of property and equipment

121

212

Other, net

7

9

Net cash used by investing activities

(549

)

(329

)

Cash flows from financing activities:

Debt repaid

(361

)

(564

)

Dividends paid

(347

)

(346

)

Increase in outstanding checks

44

80

Acquisition of treasury stock

—

(1

)

Issuance of common stock

41

3

Proceeds from noncontrolling interest

7

12

Net cash used by financing activities

(616

)

(816

)

Net decrease in cash, cash equivalents and restricted cash

(736

)

(746

)

Cash, cash equivalents and restricted cash beginning of period

1,513

1,334

Cash, cash equivalents and restricted cash end of period

$

777

$

588

Supplemental cash flow information:

Interest paid

$

213

$

251

Interest received

17

7

Income taxes paid (net of refunds received)

335

412

The accompanying notes are an integral part of these Consolidated Financial Statements.

5

MACY’S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies

Nature of Operations

Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids), cosmetics, home furnishings and other consumer goods. The Company operates approximately
870
stores in
44
states, the District of Columbia, Guam and Puerto Rico. As of November 3, 2018, the Company's operations were conducted through Macy's, Bloomingdale's, Bloomingdale's The Outlet, Macy's Backstage, bluemercury and STORY.

Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.

A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2018
(the "2017 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2017 10-K.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.

The Consolidated Financial Statements for the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.

Seasonality

Because of the seasonal nature of the retail business, the results of operations for the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
(which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

Reclassifications

Certain reclassifications were made to prior years’ amounts to conform to the classifications of such amounts in the most recent years and adoption of new accounting standards as discussed in more detail below.

Comprehensive Income

Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income. For the Company, the only other components of total comprehensive income for the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income before income taxes in the Consolidated Statements of Income. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Income. See Note 4, "Benefit Plans," for further information.

Net sales

Revenue is recognized when customers obtain control of goods and services promised by the Company. The amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for those respective goods and services. The Company's revenue generating activities include the following:

6

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Retail Sales

Retail sales include merchandise sales, licensed department income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at the time of shipment to the customer and are reported net of estimated merchandise returns and certain customer incentives. Commissions earned on sales generated by licensed departments are included as a component of total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g., alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company has elected to present sales taxes on a net basis and, as such, sales taxes are included in accounts payable and accrued liabilities until remitted to the taxing authorities.

For the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
, Macy's accounted for
88%
of the Company's net sales. Disaggregation of the Company's net sales by family of business for the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
were as follows:

(a) Other primarily includes restaurant sales, certain loyalty program income and breakage income from unredeemed gift cards.

Merchandise Returns

The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was
$265 million
,
$291 million
and
$260 million
as of
November 3, 2018
,
February 3, 2018
and
October 28, 2017
, respectively. Included in prepaid expenses and other current assets is an asset totaling
$180 million
,
$201 million
and
$178 million
as of
November 3, 2018
,
February 3, 2018
and
October 28, 2017
, respectively, for the recoverable cost of merchandise estimated to be returned by customers.

Gift Cards and Customer Loyalty Programs

The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved and revenue is recognized equal to the amount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns.

The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy’s brand, points are earned based on customers’ spending on Macy’s private label and co-branded credit cards as well as non-proprietary cards during certain tender-neutral promotional events. Under the Bloomingdale’s brand, the Company offers a tender neutral points-based program. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer.

The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was
$711 million
,
$894 million
and
$707 million
as of
November 3, 2018
,
February 3, 2018
and
October 28, 2017
, respectively.

Credit Card Revenues, net

In 2005, the Company entered into an arrangement with Citibank to sell the Company's private label and co-branded credit cards ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, in 2014, the Company entered into an amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the

7

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

underlying accounts is recognized as the respective card purchases occur and the Company’s profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for existing accounts is recognized as such activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s Credit Card Program, net of fraud losses and expenses associated with establishing new accounts.

Newly Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which established principles to report useful information to financial statements users about the nature, timing and uncertainty of revenue from contracts with customers. ASU No. 2014-09 along with various related amendments comprise ASC Topic 606, Revenue from Contracts with Customers, and provide guidance that is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. The new standard and its related updates were adopted by the Company on February 4, 2018. On the effective date, the Company elected to apply the new guidance retrospectively to each prior period presented which resulted in an increase to retained earnings of
$72 million
and
$54 million
at the beginning of fiscal 2018 and fiscal 2017, respectively.

Overall, the new standard did not have a material impact on the results of the Company's operations or consolidated statements of financial position, but impacted the presentation and timing of certain revenue transactions. Specifically, the changes included gross presentation of the Company's estimates for future sales returns and related recoverable assets, presenting income from credit operations, gift card breakage income, and certain loyalty program income as separate components of revenue and recognizing gift card breakage revenue over the period of redemption for gift cards associated with certain returns. The Company's evaluation of the new standards included a review of certain vendor arrangements to determine whether the Company acts as principal or agent in such arrangements and such evaluation did not result in any material changes in gross versus net presentation as a result of the adoption of the new standards.

In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (ASC Topic 715), which requires employers to disaggregate the service cost component from other components of net periodic benefit costs and to disclose the amounts of net periodic benefit costs that are included in each income statement line item. The standard requires employers to report the service cost component in the same line item as other compensation costs and to report the other components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses) separately and outside a subtotal of operating income. The Company adopted this standard effective February 4, 2018 on a retrospective basis to each prior period presented and has recognized its net periodic benefit costs, excluding service costs, in benefit plan income, net on its Consolidated Statements of Income.

In 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (ASC Topic 230): Restricted Cash, and ASU No. 2016-15, Statement of Cash Flows (ASC Topic 230): Classification of Certain Cash Receipts and Cash Payments. These standards were issued to resolve numerous diversities in practice with regard to the presentation and classification of certain cash receipts and payments in the statement of cash flows. The standards were effective for the Company on February 4, 2018, and were adopted using a retrospective transition method to each prior period presented. As a result of these standards, the Company included its beginning-of-period restricted cash balances of
$58 million
and end-of-period restricted cash balances of
$41 million
when reconciling the Consolidated Statement of Cash Flow movement for the
39 weeks ended
November 3, 2018
. Similarly, for the
39 weeks ended
October 28, 2017
, the Company included its beginning-of-period restricted cash balances of
$37 million
and end-of-period restricted cash balances of
$54 million
. In addition to these changes, the Company changed the classification of
$10 million
of cash payments for the prepayment of debt from an operating outflow to a financing outflow for the
39 weeks ended
October 28, 2017
.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for stranded tax effects in accumulated other comprehensive income resulting from H.R. 1, originally known as the “Tax Cuts and Jobs Act,” to be reclassified to retained earnings. The Company early adopted this standard during the first quarter of 2018 and, as a result, reclassified
$164 million
of stranded tax effects to retained earnings.

8

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

2. Earnings Per Share Attributable to Macy's, Inc. Shareholders

The following tables set forth the computation of basic and diluted earnings per share attributable to Macy's, Inc. shareholders:

13 Weeks Ended

November 3, 2018

October 28, 2017

Net
Income

Shares

Net
Income

Shares

(millions, except per share data)

Net income attributable to Macy's, Inc. shareholders and
average number of shares outstanding

$

62

307.2

$

30

304.6

Shares to be issued under deferred
compensation and other plans

0.9

0.9

$

62

308.1

$

30

305.5

Basic earnings per share attributable to
Macy's, Inc. shareholders

$

0.20

$

0.10

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

4.1

1.0

$

62

312.2

$

30

306.5

Diluted earnings per share attributable to
Macy's, Inc. shareholders

$

0.20

$

0.10

39 Weeks Ended

November 3, 2018

October 28, 2017

Net
Income

Shares

Net
Income

Shares

(millions, except per share data)

Net income attributable to Macy's, Inc. shareholders and
average number of shares outstanding

$

368

306.6

$

219

304.5

Shares to be issued under deferred
compensation and other plans

0.9

0.8

$

368

307.5

$

219

305.3

Basic earnings per share attributable to
Macy's, Inc. shareholders

$

1.20

$

0.72

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

3.7

1.3

$

368

311.2

$

219

306.6

Diluted earnings per share attributable to
Macy's, Inc. shareholders

$

1.18

$

0.71

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase
12.7 million
shares of common stock and restricted stock units relating to
1.4 million
shares of common stock were outstanding at
November 3, 2018
, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase
18.9 million
shares of common stock and restricted stock units relating to
1.2 million
shares of common stock were outstanding at
October 28, 2017
, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

9

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

3. Financing Activities

The following table shows the detail of debt repayments:

39 Weeks Ended

November 3, 2018

October 28, 2017

(millions)

7.45% Senior debentures due 2017

$

—

$

300

6.9% Senior debentures due 2029

90

3

4.5% Senior notes due 2034

80

—

6.7% Senior notes due 2028

60

3

6.375% Senior notes due 2037

43

135

6.7% Senior debentures due 2034

28

28

7.0% Senior debentures due 2028

27

2

6.65% Senior debentures due 2024

11

4

6.9% Senior debentures due 2032

5

72

9.5% Amortizing debentures due 2021

4

4

9.75% Amortizing debentures due 2021

2

2

Capital leases and other obligations

1

1

$

351

$

554

During the
39 weeks ended
November 3, 2018
, the Company repurchased
$344 million
face value of senior notes and debentures. The debt repurchases were made in the open market for a total cost of
$354 million
, including expenses and other fees related to the transactions. Such repurchases resulted in the recognition of expense of
$5 million
during the
39 weeks ended
November 3, 2018
presented as losses on early retirement of debt on the Consolidated Statements of Income.

During the
39 weeks ended
October 28, 2017
, the Company repurchased
$247 million
face value of senior notes and debentures. The debt repurchases were made in the open market for a total cost of
$257 million
, including expenses and other fees related to the transactions. Such repurchases resulted in the recognition of expense of
$1 million
during the
39 weeks ended
October 28, 2017
presented as losses on early retirement of debt on the Consolidated Statements of Income.

During the
39 weeks ended
October 28, 2017
, the Company also repaid, at maturity,
$300 million
of 7.45% Senior debentures due July 2017.

On November 28, 2018, the Company commenced a cash tender offer ("tender offer") to purchase up to
$600 million
in aggregate principal amount of certain senior unsecured notes and debentures, with stated interest rates ranging from
2.875%
to
8.75%
and maturities ranging from fiscal years
2023
to
2042
. The tender offer expires on December 26, 2018, with an early tender date on December 11, 2018.

4. Benefit Plans

The Company has defined contribution plans which cover substantially all employees who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.

In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.

10

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

In addition, certain retired employees currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.

The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:

13 Weeks Ended

39 Weeks Ended

November 3, 2018

October 28, 2017

November 3, 2018

October 28, 2017

(millions)

(millions)

401(k) Qualified Defined Contribution Plan

$

24

$

20

$

71

$

65

Non-Qualified Defined Contribution Plan

$

—

$

—

$

1

$

—

Pension Plan

Service cost

$

1

$

1

$

4

$

4

Interest cost

28

25

81

79

Expected return on assets

(51

)

(55

)

(157

)

(168

)

Recognition of net actuarial loss

7

8

23

24

Amortization of prior service credit

—

—

—

—

$

(15

)

$

(21

)

$

(49

)

$

(61

)

Supplementary Retirement Plan

Service cost

$

—

$

—

$

—

$

—

Interest cost

6

6

17

17

Recognition of net actuarial loss

2

2

6

6

Amortization of prior service cost

—

—

—

—

$

8

$

8

$

23

$

23

Total Retirement Expense

$

17

$

7

$

46

$

27

Postretirement Obligations

Service cost

$

—

$

—

$

—

$

—

Interest cost

1

1

3

4

Recognition of net actuarial gain

(2

)

(2

)

(4

)

(4

)

Amortization of prior service credit

—

—

—

—

$

(1

)

$

(1

)

$

(1

)

$

—

For the
13 and 39 weeks ended
November 3, 2018
, the Company incurred non-cash settlement charges of
$23 million
and
$73 million
, respectively, related to the Company's defined benefit plans. For the
13 and 39 weeks ended
October 28, 2017
, the Company incurred non-cash settlement charges of
$22 million
and
$73 million
, respectively. These charges relate to the pro-rata recognition of net actuarial losses and are the result of an increase in lump sum distributions primarily associated with retiree distribution elections and restructuring activity.

11

MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

5. Fair Value Measurements

The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:

November 3, 2018

October 28, 2017

Fair Value Measurements

Fair Value Measurements

Total

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

Significant

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Total

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

Significant

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

(millions)

Marketable equity and debt securities

$

96

$

26

$

70

$

—

$

100

$

23

$

77

$

—

Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.

The following table shows the estimated fair value of the Company's long-term debt, excluding capital leases and other obligations:

November 3, 2018

October 28, 2017

Notional

Amount

Carrying

Amount

Fair

Value

Notional

Amount

Carrying

Amount

Fair

Value

(millions)

Long-term debt

$

5,420

$

5,444

$

5,170

$

6,206

$

6,271

$

5,908

6. Condensed Consolidating Financial Information

Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent"), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including Bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited, and its majority-owned subsidiary Macy's China Limited. "Subsidiary Issuer" includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries."

Condensed Consolidating Statements of Comprehensive Income for the
13 and 39 weeks ended
November 3, 2018
and
October 28, 2017
, Condensed Consolidating Balance Sheets as of
November 3, 2018
,
October 28, 2017
and
February 3, 2018
, and the related Condensed Consolidating Statements of Cash Flows for the
39 weeks ended
November 3, 2018
and
October 28, 2017
are presented on the following pages.